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The Australian Carbon Scheme and the Accounting systems - Literature review Example

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The paper "The Australian Carbon Scheme and the Accounting systems" is a great example of a literature review on finance and accounting. The Australian carbon scheme has had a massive debate in the Australian parliament over some years and it has been failing until late 2010. There were some people and parliamentary members who wished it should be implemented…
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Name The Australian Carbon Scheme and the Accounting systems Tutor Institution Date The Australian Carbon Scheme and the Accounting systems Introduction The Australian carbon scheme has had massive debate in the Australian parliament over some years and it has been failing until late 2010. There were some people and parliamentary members who wished it should be implemented and therefore, proposed it but some members were totally against it and opposed it greatly. However, at the end it was passed and it is working today. The accounting and disclosure on the other hand talks about all the concepts of financial issues beginning with the rules issues regarding the financial concepts. There are various rules under deferent accounting departing that are discussed under the accounting and disclosure concepts. However, the ultimate aim of this paper is to discuss all the major issues concerning the Australian carbon scheme. This begins by examining at the legislative package that comprises of eleven bills that were debated upon in the Australian government over years. it also looks at how the Carbon Pollution Reduction Scheme (CPRS) works, how it can have impact on the Australian country, the electricity sector adjustment scheme, the emissions-intensive trade-exposed industry assistance and the proposed measures to safeguard the security of electricity supplies (Kelly, 2010). Under the accounting and disclosure system, the paper looks at the issues that may affect the accounting and disclosure concepts today and in future (Department of Climate Change). The Carbon pollution reduction scheme legislative wrap up consists of 11 bills that presented in the House of Representatives on 2 February 2010. The first bill was the CPRS bill 2010 that gave the Australia’s obligations effects under the framework of the united nations convention on the changes in climate and the Kyoto Protocol by summarizing the emissions and entities covered by the scheme, accountable entities’ compulsion to surrender units of emissions corresponding to their emissions. The other one is boundaries on the numbers of emissions units that will be issued among other issues. Other bills in the legislative package include the CPRS consequential amendments bill 2010, the CPRS charges-General bill 2010, the CPRS charges-exercise bill 2010 and the carbon Pollution Reduction Scheme charges-customs bill 2010. Others are the customs tariff amendment (CPRS) bill 2010, the Exercise Tariff Amendment (CPRS) bill 2010, the Carbon Pollution Reduction Scheme (CPRS Fuel Credits) (Consequential Amendments) bill 2010, the CPRS Fuel Credits bill 2010, the CPRS Amendment (House Assistance) bill 2010 and lastly, the Australian Climate Change Regulatory bill 2010 (Hartcher, 2008). All these bill were meant to establish a strong and effective scheme that would reduce the carbon pollution on the environment. How the CPRS work The scheme cap level decides the scheme’s environmental contribution in a cap and trade scheme. The lower the cap the higher the reduction in emissions required (Kelly, 2010). If the cap were to bound emissions to 100 million tones of carbon dioxide (CO2-e) in a specific year, 100 million emissions would be given out for that particular year. This shows that the number of tradable Australian emissions units will be same to the scheme cap thus the unit’s price established by the market. In order to divide the cost of making emissions reductions all over the economy and to make sure the CPRS meets its environmental aims, it is because the CPRS is able to cover a large range of Australian emissions (Department of Climate Change). The carbon price introduction is able to change the relative prices of services and goods making the emissions-intensive goods highly expensive in comparison to those that are less intensive in emissions. This brings about a great inducement for the consumers and businesses to change their behaviors causing reduction of emissions. The businesses are able to pay for the emissions in Australian units if their interior costs of declining are higher than the unit’s price and to reduce their emissions directly if their interior costs of subside are lower than the price of units. The incentives of market work to shift the units of emissions to the highest value use and to give confidence to the cheapest declination to come first. The ability of the CPRS to realize the best reduction ways does not depend on the government at all, it only motivates the innovations all over the economy as people look for coming up with little emission means of goods production and services (Department of Climate Change). This makes sure the emission cap is acquired at a minimal cost to the economy. The business that is affected directly under the CPRS will have to report the emissions which they are liable and give in an eligible unit of emission for each tone of emissions. It should be noted that around 75 percent of the total emission in Australia is covered by the CPRS which includes all the greenhouse gases together with the Kyoto Protocol. Places covered by the Carbon Pollution Reduction Scheme The CPRS that was implemented in 2010 is able to bring to control the Australian carbon pollution by placing the carbon price in the history of the Australia for the first time. This means that the goods that highly produce the emissions will be highly charged or costly to make it hard for the people to purchase in order to control the emissions. This covers a number of places in the environment beginning with the household (Hartcher, 2008). The products, services and goods that are used in the house have their prices changed by the CPRS and the government is helping the households to adjust to these new changes. The help from the government is to ensure all the households receive money to help them tackle the issues concerning the CPRS though all the households can take action to minimize the emission, contribute the emissions reductions and reduce their energy costs over time. The other place well covered is the industry whereby around 1000 businesses in Australia can be directly affected by the proposed CPRS as the estimates suggests. However, the CPRS is able to affect many more businesses than estimated if the carbon price is introduced. The CPRS also came up with a number of assistant programs that can help the businesses and these are as follows. The climate change action fund, the transitional electricity cost assistance program, coal sector adjustment scheme and the emissions-intensive trade-exposed assistance program. The CPRS also includes the provisions to minimize the fuel taxes based on a cent-for-scent to counterbalance the initial impact of the fuel price (Department of Climate Change). The other area covered is agriculture where the agricultural emissions are eliminated from the CPRS legislation government coverage. However, 16 percent of the total greenhouse gases in Australia comes from the agricultural activities. Therefore, putting them in the emission reduction plans can greatly reduce the cost of doing so for the whole country. Reforestation is the other area covered whereby the forests emit the carbon dioxide from the atmosphere and keep it as they grow (Tsikas, 2011). This is the process referred to as the forest carbon sequestration. The CPRS allows the people who set up the forest in accordance with the CPRS principles to be able to acquire the emission units from the carbon sequestered. It should be clear that the project of CPRS reforestation is voluntary but the participants must satisfy certain needs. The Australian internal governments and the related bodies will be affected in the same way the businesses are affected by the CPRS (Kelly, 2010). There is high need of the EITE assistance program because Australia is the first country to implement this system of carbon scheme and therefore this may have some considerable impacts on the businesses in the country that must be covered by the government to portray a good image of the project and the country at large. This is evident on the CPRS white paper where the government decides to assist these businesses to minimize the risk of offshore relocation of such businesses. The electricity Sector Adjustment Scheme This is another department that was covered in the CPRS White paper where the Australian government entrusted to give slight assistance to the coal-fired electricity sector through the Electricity Sector Adjustment Scheme (ESAS) set to assist the transition to a low economy emissions under the CPRS. This is evident in the CPRS legislation that was presented in the parliament on 2 February 2010 (Tsikas, 2011). The main reason of having the electricity sector adjustment scheme is that the CPRS puts a carbon cost on all the generators of fossil fuel-fired. The most intensive emission generators may be limited in the passing on the cost ability, that leads to falling in their asset values (Department of Climate Change). These are some of the effects that were recognized and made the government to come up with the ESAS to run efficiently the transition to a lower carbon electricity generation sector while upholding the supply security endorsing the stable contracting energy markets and encouraging investor confidence in the markets of energy. This leads to establishment of certain measures to defend the security of electricity supplies. Issues affecting the present and the future accounting and disclosure concepts The accountancy and disclosure issues have been facing various challenges over the past few years. The accountancy profession in the recent years has extensively become technical and this has made a lot of prominence to be put on disclosures and the general means of preparing the financial statements (Accounting staff members). Therefore, it is evident enough that the major issue affecting the accountancy profession is the ignorance that is observed on most people with this profession. The disclosure issues are given the first priority. This has lead to many individuals who acquire the accountancy profession to move on acquiring extra knowledge in something different in order to be competitive enough in the financial field. Thus, having the accountancy profession only may not be of much help since such a person is likely to face negligence. However, other various issues affect the current and the future of the disclosure issues greatly. Some of these issues are as follows (Accounting staff members). To begin with, there is the common error in disclosures and the main problem that is faced by various professional entities of accountants is that many entities put the interest and reliance on their production accounts packages. Initially, there are only the skeleton produced by the accounting software packages once the trial balance is input into it. The identification that various companies have different financial statement users and each of these companies is different from each other. Most of the time the financial statements needs diverging financial information degree and the accounting software packages acquire the capability of tailoring various disclosure requirements. The best example is a manufacturing company that has secret bank loan will need to disclose the whole issue as the bank debt meaning tat it will no longer be secured. Other issues that affect the accounting and disclosure issues come as a result of errors in the note of financial statement. These are as follows. The first point to note is that the financial statement is reraly disclosed on the basis of preparation and therefore when this occurs then it is a problem. However, this can occur when the financial statements accounts are not prepapred on a reliable software package accounts production (Accounting staff members). Basically the basisi of preparation of the financial statements should only disclose the production of the accounts and not the financial statement. Another disclosure error that occurs on the accounting policies is the turnover note. This is the total invoioced goods sales though not including VAT as well as the net of trade discounts. Note that this is normally the issue that comes up where a company has contracts that are long-term or could be long-term services. This has occurred ever since the application Note od G to FRS 5 or the incerption of UITF 40 (Accounting staff members). Such revenue recogition disclosure in relation to the long-term service, the contract is left out meaning that the revenue is ony identified when there is a consideration right. Therefore, through the turn over note, the revenue recognition that is rarely disclosed is really disclosed. Fixed assets is another thing that is never disclosed under the accounting policies, the only thing that is sometimes disclosed is the company’s applicable depriciation rates. sometimes the disclosed deprisciation rates in the financial stetements are not similar to the depreciation rates that are actually employed when a review of a file is done. Therefore, when the fixed asset is disclosed in the note of the accounting policy, it is not the depreciation rate that is contained because the note is not only linked to the depreciation rate but also the fixed asset. The other issue that affects the accountacy issue through disclosure error in the financial statement is the stock that commonly relies on the production accounts software to produce the standand SSAP9 note that suggests thstock is treasured at the net realisable value or lower of the cost. Most of the preparer’s ust that stock evaluation basis should be disclosed for example, whether stock is treasured on a first-in-first-out (FIFO), last-in-last-out (LIFO) or measures average basis. Another disclosure error of financial statement that is also a major issue affecting accounts and accountancy process is the financial instrument (Accounting staff members). These are normally taken into consideration by small entities as applying to the listed companies but this is very wrong. Note that a financial instrument can refer to a bank loan, debtors, overdraft, creditors and so on. The accounting policy must be disclosed where a company contains material financial instruments and material loans especially when the adopted accounting policy is in respect to the same financial instruments. Take into account that the only thing that need to be disclosed is the material accounting policies and not the financial instrument which means that in such cases where the financial instrument is disclosed, then a disclosure error will have occurred greatly affecting the accounts and accountancy (Accounting staff members). The other major issue is pension whereby in most parts of the UK, a company may have definite pension benefit scheme or a definite contribution pension scheme and sometimes both. The disclosure of the pension is a complex issue that needs to be addressed but it should be clear that such an issue is never disclosed because it is very sensitive and therefore incase it is, then it leads to a very massive problems that can greatly affect the accounting process. Other issues that greatly affects the accounting and disclosure concepts and that are under the errors of accounting policies include director’s emoluments, deferred tax, turnover, debtors (UITF 40), secured debts, corporation tax, dividend, ultimate controlling party among others. These are very sensitive concepts of accounting and disclosure issues that must be taken into consideration because they affect them in one way or the other (Accounting staff members). The relationship between the Australia’s Carbon Scheme and the Accounting and disclosure issues The Australian Carbon Scheme basically talks about the strategies laid down to reduce the emissions of greenhouse gases and to some extent the Kyoto protocol. This was done through passing the legislative package bills in the Australian parliament by the participatory members. Note that these bills refers to the strategies of minimizing these emissions as well as the rules governing them whereby if broken, there are severe penalties that an individual must face (Department of Climate Change). This is stressed by the fact that the government through the CPRS coverage helped most businesses. The accounting and disclosure issues on the other hand also have their principles and rules that govern their performance and that lead to the enhancement of business and financial concepts. For example, some of the principles that measure the independence of the auditors are as follows. The accountant will never be independent when he or she has a controversial interest with the audit client, cannot be independent if he or she audits the firm’s works alone, if functions as management or an audit client employee or if he or she acts as an advocate for the audit client (Accounting staff members). The main point brought up is that the accountant functions under certain boundaries that he or she should not go beyond. The same case is seen in the Australian Carbon Scheme where all the businesses are helped out by the government for the CPRS coverage meaning that they must do as the government wishes since they posses the government’s money. Therefore, their boundaries are the principles laid down by the CPRS and the Australian government. For example, they must work towards reduction of the emissions of the global gases, which is the main objective of the country coming up with such a scheme. Therefore, the two are greatly related since they both function under sets of principles and goals that must be achieved. The accounting and disclosure issues also have rules that govern their financial relationships, employment relationships, business relationships and the general standards of the auditor’s independence. All this are based to enhance a good and smooth relationship between the accountants and the clients (Accounting staff members). This is primarily set to enhance the performance of the business and the financial issues. The carbon scheme of Australia on the other hand also builds a strong relationship between the citizens of the country and the government in reducing the emissions of the gases into the atmosphere. For example, before the bill was implemented, it was put open for the citizens of the country to express their views concerning the implementation process and most of the people proposed its implementation. The government also went forward to support the same citizens on the implementation process by giving them financial support to give them the strength or motivate them to fight the emission of those gases completely. That means that the relationship of the Australian government and the citizens is good. Therefore, the two issues are greatly related. Lastly, both the concepts faces challenges in their implementation processes. The accounting and disclosure concept faces a lot of problems that greatly affects its performance. Most of these issues are tackled above. The major challenge that faces the disclosure issue is the errors that occurs in the financial statement and the accounting policies that greatly affect the performance of various firms (Accounting staff members). The Australian carbon Scheme also faced massive challenges due to the growth of opposition that was experienced. The planned carbon tax by the Australian government received up to 60 percent of voters against the plan with food retailers, agricultural firms and miners writing to their prime minister opposing the tax. Therefore, it is evident enough that the two articles or issues are related (Hartcher, 2008). References Accounting staff members, (2005). Current accounting and disclosure issues in the division of corporation finance. US securities and exchange commission, Washington, D.C. Department of Climate Change (2008), Carbon Pollution Reduction Scheme - Green Paper Department of Climate Change (2008), Carbon Pollution Reduction Scheme: Australia's Low Pollution Future - White Paper Hartcher, Peter (2008). "Carbon plan fuels meltdown". Sydney Morning Herald. http://www.smh.com.au/text/articles/2008/12/19/1229189886133.html. Joe Kelly (2010). "Tony Abbott accuses Kevin Rudd of lacking 'guts' to fight for ETS". The Australian. Mick Tsikas, (2011). Australian carbon scheme faces growing opposition retrieved from http://www.reuters.com/article/2011/04/18/us-australia-carbon-idUSTRE73H06C20110418 Read More
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